E-mail Marketing the Right Way

By Todd Wassserman

Whether you do it yourself or outsource it to someone else, here's the lowdown on e-mail marketing to avoid having e-mails be filtered away as spam.

With costs as low as $15 a month, hiring a company to for e-mail outreach is probably the best marketing investment a small business can make.

While about 95 percent of companies do at least some e-mail marketing, most get someone else to do it for them. About half of companies with between one and five employees do their e-mail marketing in house, says Jeanniey Mullen, senior director of e-mail marketing at OgilvyOne Worldwide, a New York interactive ad agency. But the larger the company, the more likely they are to outsource the function, she says. For companies that have more than five employees, the percentage jumps to more than 80 percent, according to Forrester Research, of Cambridge, Mass.

That’s because sending a mass e-mail may sound simple enough, but in reality it can be pretty tedious.

The pitfalls of doing it yourself

Jennifer Gordon, president of Sojourn Bags, a four-year-old Chicago company that sells distinctive handbags, tried the do-it-yourself approach but found that if she got one e-mail address wrong in a mass mailing, the whole thing would bounce back. “We didn’t have the bodies to throw at the problem,” says Gordon, whose handbag firm has five full-time employees and 27 part-time sales reps.

While manpower is one problem, more often firms that do their own e-mail marketing run into another firm because they lack an understanding of the specifics that can make or break an e-mail marketing campaign. Here are some questions you need to ask:

• Are you using a spam buzzword that will get you blocked by most firewalls?
• Will your e-mail look the same in e-mail programs from Google, Yahoo! and MSN?

With those questions in mind, about 18 months ago, Gordon hired Constant Contact, a Waltham, Mass., company that handles outsourced e-mail marketing campaigns. Other such firms include Bronto Software and Email Labs.

Return on investment

Gordon says she pays $15 a month to reach about 500 clients. Since she signed up, sales have risen about 65 percent. “We see a huge jump in numbers when we send [an e-mail blast] out,” says Gordon, although she notes that not all of the increase in sales is due to the e-mail marketing. “It’s definitely the best marketing money we spend.” Gordon couldn’t quantify a response rate because, she says, it’s hard to tell if a buyer on the website was driven by an e-mail plug. Generally, the conversion rate for e-mail is about two to five percent and the engagement rate (meaning those who open the e-mails) is about 60 percent, according to industry watchers.

Sojourn only sends e-mails to those who opt to receive them and so there are generally no worries about being lumped in with spam. But just because you aren’t a spammer, doesn’t mean you won’t be treated as one. A less-than-reputable e-mail firm may work with a spammer and as a result, all e-mails from the e-mail firm’s IP address may be blocked by certain recipients.

As a result, some firms may want to also buy their own IP address, which jacks the monthly price up into the $200 range. Gail Goodman, CEO of Constant Contact, says her customers rarely ask for an IP address because her company doesn’t work with spammers. “Permission marketing is the only way to go,” she says.

Usually, though, firms can expect to pay between $15 and $75 a month to get a third party to run their e-mail marketing. The average return on investment on $1 spent on such a program is $57 in new business, according to the Direct Marketing Association, an industry group based in New York. Mullen says that rate can fluctuate wildly.

This is one area where small businesses can have the edge over large ones, she says, because they have smaller e-mail lists and can experiment with different formats. “Small companies that take e-mail seriously can have significant success,” Mullen says.